Executive Summary / Key Takeaways

• Digital Transformation Accelerating: Gannett is undergoing a profound digital-first transformation, shifting from a legacy print model to a diversified digital media and marketing solutions powerhouse, with digital revenues projected to near 50% of total revenue by year-end 2025.
• Strategic AI & Content Monetization: The company is leveraging advanced AI technologies and strategic content licensing deals, such as the recent Perplexity partnership and Taboola (TBLA)'s Deeper Dive, to enhance operational efficiency, deepen audience engagement, and unlock new high-margin revenue streams from its vast content library.
• Financial Momentum Building: Despite a challenging first half, Gannett anticipates a stronger second half of 2025, with sequential improvements in digital revenue, meaningful adjusted EBITDA growth, and over 100% free cash flow growth, driven by digital acceleration and a new $100 million cost reduction program.
• Deleveraging and Capital Structure Strength: Aggressive debt repayment, fueled by strong free cash flow and strategic asset sales, is significantly strengthening the balance sheet, with nearly $100 million repaid in H1 2025 and a target of $135 million for the full year, aiming for a first lien net leverage approaching 2x by year-end.
• Competitive Rebalancing: The ongoing antitrust actions against Google (GOOGL) are expected to rebalance the digital advertising ecosystem, creating a more favorable and transparent marketplace that directly benefits content creators like Gannett, potentially leading to higher CPMs and stronger fill rates.

The Digital Imperative: Gannett's Strategic Evolution

Gannett Co., Inc. (GCI) stands at a pivotal juncture, actively transforming from a traditional publishing giant into a diversified digital media and marketing solutions enterprise. Incorporated in 2013 and rebranded in 2019, Gannett has systematically pursued a digital-first strategy, aiming to inspire, inform, and connect communities while driving sustainable growth. This strategic pivot is critical in an industry grappling with declining print revenues and the rapid evolution of digital consumption habits.

The media landscape is increasingly shaped by macroeconomic conditions, including inflation and interest rates, which influence advertising spend. Furthermore, the rapid application of artificial intelligence (AI) is accelerating the pace of change, presenting both opportunities and risks. Gannett's strategy is to adapt by diversifying its digital revenue streams, optimizing content distribution, and leveraging its expansive reach. The company operates through three core segments: Domestic Gannett Media, Newsquest (U.K. operations), and Digital Marketing Solutions (DMS) under the LocaliQ brand, each playing a distinct role in this digital renaissance.

Technological Edge: AI as a Growth Catalyst

Gannett's strategic response to industry shifts is deeply rooted in technological innovation, particularly in AI. The company is not merely observing the AI revolution; it is actively integrating AI into its core operations and content monetization strategies. This technological differentiation is crucial for maintaining a competitive edge and driving future growth.

A key technological differentiator is Gannett's proactive engagement with AI platforms for content licensing. The recent strategic AI content licensing agreement with Perplexity, an AI-powered answer engine, exemplifies this. This deal integrates Gannett's premium content and trusted journalism from USA TODAY and its network into Perplexity's AI-powered search experiences, including its Comet web browser. The tangible benefits are clear: the deal includes both licensing fees and an advertising revenue share, representing what management believes is "fair value for our content." This positions Gannett to monetize its vast content archives in a new, scalable way, ensuring attribution and compensation for its intellectual property.

Further innovation is seen in the deployment of Taboola's generative AI answer engine, Deeper Dive, within USA TODAY. As the first U.S. publisher to launch this technology, Gannett aims to connect readers with clear answers and real-time content exclusively from its trusted network. This initiative is expected to increase time on site, deepen reader loyalty, and create a new monetization channel by inserting contextually relevant, high-intent ads directly into AI-powered results pages, capturing "search-like advertising revenue on our platform." Early performance has "exceeded expectations," and the growing volume of user queries provides real-time insights to inform content strategy, driving stronger advertising CPMs and increased engagement.

Gannett's two-pronged approach to protecting and monetizing its content in the AI era further highlights its technological foresight. First, by onboarding to the Snowflake (SNOW) Marketplace, Gannett provides enterprise developers with a straightforward, fully licensed way to train and deploy AI models on its content under transparent, usage-based terms. This creates a new revenue stream while protecting intellectual property. Second, the company has implemented new measures to prevent unauthorized data collection and scraping, directing such activities to a specific licensing page. This technology is "already reducing unauthorized use" and underscores the premium value of Gannett's trusted real-time news content. These initiatives collectively contribute to Gannett's competitive moat by establishing it as a leader in fair content monetization in the AI landscape, potentially setting industry standards and attracting more partnerships.

In its Digital Marketing Solutions (DMS) segment, LocaliQ, AI is also a core differentiator. The launch of a conversational AI voice agent within Dash, LocaliQ's AI-powered prospect and lead management software, aims to transform customer engagement. This agent helps businesses attract, engage, and convert potential customers through automated, intelligent conversations, ensuring follow-up on leads that might otherwise be missed. This enhances customer retention and increases average revenue per user (ARPU) by improving client ROI. Additionally, strengthening search optimization capabilities with tools like Google AI Smart Bidding and establishing CRM integrations deliver more targeted, personalized campaigns and stronger insights for customers, leading to measurable improvements in campaign performance and retention. These technological advancements are expected to contribute meaningfully to DMS revenue growth in the second half of 2025 and into 2026.

Competitive Landscape and Strategic Positioning

Gannett operates in a dynamic media industry, competing with a diverse set of players ranging from traditional publishers to digital-native platforms. Its competitive positioning is defined by its extensive local network, its ongoing digital transformation, and its proactive stance on AI monetization.

Compared to large national players like The New York Times Company (NYT), Gannett's strength lies in its unparalleled local and regional reach, encompassing over 200 local publications alongside USA TODAY. While NYT excels in premium digital subscriptions and has a higher digital revenue growth rate (e.g., NYT's 7-10% in 2024 vs. GCI's 5-7%), Gannett's local network provides a unique value proposition for advertisers seeking targeted local audiences and a differentiated product for local subscribers. NYT's profitability margins (gross 50-55%, operating 15-20%) generally surpass Gannett's (gross 40-45%, operating 10-15%), reflecting NYT's higher digital penetration and lower legacy print costs. However, Gannett's efforts to localize pricing and focus on high-value local digital-only subscriptions aim to close this ARPU gap.

Against regional peers like Lee Enterprises (LEE), Gannett's broader scale and national-local integration through the USA TODAY NETWORK provide a stronger distribution network and faster content syndication. While LEE focuses on cost-cutting and local digital expansion, Gannett's larger cash flow generation (10-15% growth vs. LEE's flat trends) allows for greater investment in digital initiatives and AI technologies. Gannett's digital innovation, while slower than NYT's, is more advanced than LEE's, which tends to have lower R&D spend.

News Corporation (NWSA), a global conglomerate, competes with Gannett in digital marketing and publishing. NWSA's global reach and advanced AI-driven content personalization tools give it a superior market position and higher revenue growth (8-12%). NWSA's financial health and technological edge, including investments in AI for risk management and faster ad targeting, could erode Gannett's market share in broader digital segments. However, Gannett's niche local publications and strong community engagement offer a distinct advantage in specific markets, where its local network effects can drive higher customer loyalty and recurring subscription revenue.

Indirect competitors, primarily large technology companies like Google (Alphabet) and Meta (META) (Facebook), pose significant challenges. These platforms offer alternative, often cheaper, advertising solutions and control significant portions of the digital ad market. Google's historical monopolistic practices in ad tech have systematically diverted revenue from publishers. However, the federal court's recent ruling in favor of the DOJ on Google's ad tech practices is a significant positive development for Gannett. This ruling validates Gannett's long-standing claims in its own antitrust lawsuit against Google, which is expected to proceed to trial in 2026. This rebalancing of the digital advertising ecosystem is anticipated to unlock higher CPMs, stronger fill rates, and more equitable revenue sharing for publishers like Gannett, leveraging its "attractive brand-safe platform."

Gannett's competitive strategy is to leverage its audience scale (181 million average monthly unique visitors in Q2 2025, with consistent page view growth) and brand safety to attract premium, high-CPM direct advertising campaigns. The company is also diversifying its monetization beyond traditional advertising, including e-commerce (e.g., AddressUSA real estate portal, expected to generate "immediate revenue opportunities at a very high margin") and content syndication (e.g., Reuters bundled content offering). This multi-faceted approach, combined with aggressive cost management and strategic AI adoption, aims to drive sustainable growth and improve profitability in a highly competitive and evolving market.

Financial Performance and Outlook

Gannett's financial performance in the second quarter of 2025 demonstrated sequential improvement, signaling a positive trajectory for the latter half of the year. Total revenues for Q2 2025 were $584.9 million, a decrease of 8.6% year-over-year, or 6.4% on a same-store basis. While this represents a 130 basis point improvement from Q1 same-store revenue trends, management acknowledges the need for further acceleration.

Digital revenues, a cornerstone of Gannett's transformation, totaled $265.4 million in Q2 2025, down 4.6% year-over-year, or 2.8% on a same-store basis. Importantly, digital advertising returned to year-over-year growth in Q2, increasing 4% compared to being slightly down in Q1. Digital-only subscription revenues were $42.7 million in Q2, with digital-only ARPU increasing to $7.79, marking sequential and year-over-year growth. Print and commercial revenues continued their secular decline, down 13.0% year-over-year to $319.4 million, but management is focused on optimizing these operations for profitability.

Profitability metrics showed sequential strength. Total Adjusted EBITDA reached $64.2 million in Q2 2025, a 27% sequential increase from Q1, with margins expanding to 11%. Net income for the quarter was $78.4 million, a significant improvement of $64.6 million year-over-year, largely influenced by a $87.5 million tax benefit. Operating costs combined with selling, general, and administrative expenses decreased approximately 8% in Q2, reflecting ongoing cost management efforts.

Liquidity and capital structure management remain a top priority. The company repaid $23.4 million of debt in Q2 2025, bringing total debt repayment for the first six months of 2025 to nearly $100 million. As of June 30, 2025, total outstanding debt was $988.9 million. Gannett expects to pay down $135 million in debt for the full year 2025, funded by amortization, asset sales (including approximately $20 million in real estate assets in the pipeline), and free cash flow generation. Free cash flow for Q2 2025 was $17.6 million, representing a 73% sequential growth from Q1. Capital expenditures for the remainder of 2025 are projected at $30 million, primarily for digital product development and system upgrades.

Gannett has updated its full-year 2025 outlook, reflecting a "slower-than-expected pace of revenue improvement" in the first half. The company now anticipates digital revenue to be roughly flat on a same-store basis for the full year, but with growth of 3% to 5% year-over-year in the last six months, driven by digital advertising growth, accelerating DMS trends, and incremental AI licensing. Digital revenues are expected to represent nearly 50% of total company revenue by year-end. Total same-store revenues are projected to decrease in the low to mid-single-digit range for 2025, with low single-digit declines in the second half, positioning revenue to be flat in early 2026.

A significant driver for the improved outlook is the recently initiated $100 million annualized cost reduction program, which began in Q3 2025. This program, focused on automation, outsourcing, and eliminating duplication, is expected to lead to "meaningful total adjusted EBITDA growth compared to the prior year" in the second half of 2025, and solid growth again in 2026, leading to continued expansion of adjusted EBITDA margins. Free cash flow is still forecasted to increase roughly 30% versus 2024, despite a slight trim to reflect near-term cash required for cost initiatives.

Risks and Challenges

Despite the optimistic outlook, Gannett faces several pertinent risks. The macroeconomic environment, characterized by inflation and interest rate fluctuations, could continue to impact advertising performance and consumer spending. Reliance on third-party platforms, particularly search engines and social media, remains a risk, as their policy changes can adversely affect traffic, engagement, and revenues. The rapid evolution of the AI ecosystem also presents both opportunities and the risk of disruption if the company fails to adapt quickly or secure fair value for its content. Furthermore, Gannett's leverage, with the 2029 Term Loan Facility accounting for approximately 76% of outstanding debt, exposes it to interest rate increases and could limit financial flexibility if operating cash flows decline significantly. The ongoing secular decline in legacy print business revenue streams necessitates continuous cost reduction initiatives to offset revenue pressures.

Conclusion

Gannett is executing a determined digital transformation, strategically leveraging its expansive audience, technological innovations in AI, and disciplined financial management to build a sustainable future. The company's proactive approach to AI content monetization, exemplified by partnerships with Perplexity and Snowflake, positions it at the forefront of a rebalancing media landscape. Coupled with aggressive debt reduction and a substantial cost-cutting program, Gannett is laying the groundwork for improved profitability and cash flow.

While challenges from macroeconomic headwinds and legacy print declines persist, the sequential improvements in digital revenue trends, the return to growth in digital advertising, and the strategic focus on high-value digital subscriptions underscore the building momentum. With management projecting revenue to flatten in early 2026 and anticipating significant adjusted EBITDA and free cash flow growth, Gannett is poised to unlock substantial value. The ongoing antitrust actions against Google further present a compelling opportunity to enhance digital advertising economics, reinforcing the investment thesis that Gannett is on a clear path to a digital renaissance.